Stocks Struggle at Elevated Levels as Investors Cautious on the Fed

European stock markets are heading south, snapping the rise over the last seven days. The Stoxx Europe 600 is down after extending a 1-year high yesterday, along with the DAX and the FTSE. Approximately 50% of the firms in the index have now reported results and 51% of these beat profit estimates, while 61% exceeded sales forecasts. The FTSE 100, which managed to close above the 7300 mark Wednesday but fell back slightly again today and the DAX is also trading below 11800, but both remain at lofty heights and investors seem to be turning cautious again at these levels, amid ongoing political uncertainty and as the Fed remains on course for further tightening. The Nikkei underperformed, however, as a strong Yen weighted on automakers and exporters. Oil prices meanwhile are little changed on the day.

The EUR/USD whipsawed and moved higher despite higher U.S. yields following Thursday stronger than expected U.S. CPI and Retail Sales.  Yellen was on the hill again on Thursday in front of the House instead of the Senate.  The message remains the same, keeping the March meeting live.

WTI crude prices are up 0.6% today, at $53.40, which is just a few cents from the intraday peak. Prices have extended the rebound from yesterday’s $52.75 low. The week’s high at $53.95, seen on Monday, has remained resistance. The overall flat trend, which is rare in this market, looks to be persisting, with news of record crude and gasoline stockpiles in the U.S. failing to generate strong downside momentum, partly as recovering U.S. economic growth suggests increased demand.

Weidemann Warns Against Bank Deregulation Competition

The ECB’s Weidmann warns against bank deregulation competition. The Bundesbank President told Germany’s Bild that bad loans triggered the financial crisis 10 years ago, and that an important lessons from the events was that banks needed stricter supervision and more equity capital. Weidmann warned that it would be a mistake to turn the clock back and that a deregulation competition must definitely be avoided. Weidmann urged quick talks with the U.S. government while saying that there are still significant obstacles to access to Chinese market, takeover of companies, or capital movements

ECB profits were boosted by interest income and foreign reserves. The ECB reported profits of EUR 1.19 billion for 2016, up from EUR 1.08 billion in 2015, as net interest income on policy assets rose to EUR 1.04 billion from EUR 0.89 billion and interest income on foreign reserve assets rose. At the same time expenditure for supervisory tasks recovered via fees amounted to EUR 382.